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International Business Machines Corp. (IBM), Oracle Corporation (ORCL), And A Trio Of Reasons to Expect Tech to Outperform

In other words, firms held off from spending in Q3, which then got released in the next quarter.

For example, International Business Machines Corp. (NYSE:IBM) talked of US orders falling off a cliff in September and spooked the market, only to report a strong quarter in the next set of results. Guess what? International Business Machines Corp. (NYSE:IBM) missed estimates this time around as sequester fears kicked in. Oracle Corporation (NASDAQ:ORCL) also gave a disappointing set of numbers this quarter and blamed it on internal execution. Even smaller companies like F5 Networks, Inc. (NASDAQ:FFIV), Fortinet Inc (NASDAQ:FTNT), Citrix Systems, Inc. (NASDAQ:CTXS), Tibco Software Inc. (NASDAQ:TIBX) and others have warned over profits.

Fascinatingly, they have all said a similar thing with regards their pipelines. None have seen them reduce –as they might in a systematic slowdown- but rather that there was a failure to convert them into orders. The reasons for this differ with the individual companies. F5 Networks, Inc. (NASDAQ:FFIV) and Fortinet Inc (NASDAQ:FTNT) saw notably weaker performance from telcos, Oracle Corporation (NASDAQ:ORCL) blamed sales execution, International Business Machines Corp. (NYSE:IBM) blamed a mix of things, while Citrix Systems, Inc. (NASDAQ:CTXS) said a new solution caused order delays.

Of these companies I think Tibco Software Inc. (NASDAQ:TIBX) may be facing competitive pressures, and F5 Networks, Inc. (NASDAQ:FFIV)‘ near-term prospects are somewhat made unclear, thanks to its product refresh taking place. These things can take a quarter or two to work themselves through, so anyone looking for a tech stock to play a ‘bounce back’ may want to be a bit cautious with it for now. In addition, Citrix Systems, Inc. (NASDAQ:CTXS) reported a good quarter with its rival Netscaler product, so it may well be taking market share from F5 Networks, Inc. (NASDAQ:FFIV).

I think that they all experienced some tactical reluctance amongst customers, with many of them adopting the same ‘wait and see’ approach that they did in Q3.

If this thesis is correct, then this is not the time to go underweight in technology, and investors should hold their nerve with some of the disappointing results we have seen in the quarter. If Q2 bounces back in the way that Q4 did, then the sector could outperform in the coming months.

The article Three Reasons to Expect Tech to Outperform originally appeared on is written by Lee Samaha.

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